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Charitable Gift from Board Member
Grantor served on the board of directors of two charities. In anticipation of a charitable gift by grantor, both boards amended their bylaws to segregate gifts from Grantor and prevent him from having any authority over such funds. Grantor then created an irrevocable charitable lead annuity trust (CLAT) that would make annual payments to the charities for 20 years. Grantor retained no power over the trust nor any reversion interest. As a result, Grantor was able to claim a charitable deduction for the actuarial value of the guaranteed annuity payable to the charities. The trust funds were also excluded from Grantor's estate for estate tax purposes. Insofar as the grantor retained no control over the trust, the IRS ruled that the CLAT was not a grantor trust and was entitled to an income tax deduction for the amounts of income paid to the charities.
Source: Let. Rul. 200108032.
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
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